Financing Smart and Sustainable Mobility Solutions
One of the main challenges that cities face today is how to provide efficient and sustainable mobility: experts anticipate that, in terms of the annual number of passenger-kilometers traveled, mobility in cities will virtually treble between 2010 and 2050 and make up 64 percent of the total volume of mobility. Moreover, transportation is the second main source of energy consumption and cause of CO2 emissions in a city, ranked only behind buildings. An inefficient transport system not only damages the environment, but also costs cities and countries a significant amount of money. In the EU, for instance, congestion that frequently occurs in and around urban areas costs nearly EUR 100 billion, or 1 percent of the region’s GDP, annually.
Around the world, city planners are therefore looking at smart and sustainable mobility solutions that meet rising mobility needs in cities while simultaneously reducing energy consumption and emissions. There are a few ways to reach the goal, including by lowering mobility needs, introducing soft modes of transport (such as cycling or walking) and integrating electric vehicles into the urban environment. A shift from individual to collective transport would also significantly help reduce energy consumption and emissions. Yet, there is still a long way to go: within the EU, 73 percent of the annual passenger kilometers result from individual road transportation, i.e., individual vehicles, while 8 percent and 6 percent, respectively, are from collective road and rail transport and only 1 percent is attributed to metro and tram passengers, according to the Smart Cities Initiative.
Consequently, making public transport more efficient and more attractive to city dwellers is the need of the hour. One option more and more cities are choosing is bus rapid transit systems. As part of a multimodal mix, they are a cost-efficient and effective solution for moving people through dense urban areas. More than 40 such systems are now operating in South America, Europe, Asia, Australia and North America. For example, Seoul has introduced bus rapid transit systems to reduce congestion by making public transport more effective and attractive. The system includes dedicated bus median lanes, high-quality bus stops, real-time information for passengers and system operators and state-of-the-art buses. In Seoul, this has resulted in a fivefold reduction in travel times and a 27 percent cut in the number of accidents — within a year, according to McKinsey Global Institute and McKinsey Sustainability & Resource Productivity. Africa joined the list when Johannesburg, South Africa, opened the first phase of a USD 2.2 billion system to transport fans to World Cup matches in 2010, according to Urban Land Institute and Ernst & Young. Other cities, including Lagos, Nigeria, and Dar es Salaam, Tanzania, are also building or considering rapid bus lines to serve growing populations and promote economic growth.
Other smart mobility solutions include interactive operations control systems that allow optimal deployment planning and efficient networking of public transportation. Modern passenger information systems that provide all necessary information in real time as well as solutions for e-ticketing are other ways to make public transport more efficient.
However, the development and deployment of smart and sustainable transport by applying new technologies is a cost-intensive undertaking. As a result, financing such innovative mobility solutions remains one of the greatest challenges: the ongoing economic and financial crisis has dramatically decreased the amount of long-term finance available and has made it more difficult to obtain conventional bank loans. Moreover, at a time when many government budgets are under severe pressure, public spending remains tight. Given the dramatic need for investments in infrastructure, such as public transport systems, the role of private capital seems more critical than ever, according to the World Economic Forum USA. As a result, attention is turning to ways to unlock the investment potential of the private sector to meet the supply deficit.
Many cities have therefore started to encourage public private partnerships to develop urban infrastructure projects. Establishing such partnerships to develop and implement smart mobility solutions requires a financing partner who is also an industry expert. Such a partner can understand project developers’ needs better and can help identify and procure the best equipment/technology. An integrated offering comprising technology and finance also best addresses most challenges project developers face in ensuring speedy, efficient execution.
In our urban millennium, cities must address the huge challenge of reconciling growth and quality of life. Especially in the transport sector, they must try to meet increasing mobility needs while reducing congestion, energy consumption and costs. With innovative mobility solutions now being available and with momentum growing for PPP, smart and sustainable mobility seems to be becoming a reality for the mega-cities of our time.
Roland W. Chalons-Browne is President and CEO of Siemens Financial Services GmbH; Munich. Based in Munich, he is responsible for leading Siemens Financial Services business worldwide. Roland has been CEO of Siemens Financial Services Inc. in the US since October 2005. Based in Iselin, New Jersey, he was responsible for leading commercial finance and leasing business across North America. The Financial Services unit of Siemens is an international provider of financial solutions in the business-to-business area. The international network of financial companies coordinated by Siemens Financial Services GmbH in Munich, comprises more than 2,500 employees worldwide. Financial Services supports Siemens as well as other companies, with a particular focus on the Sectors of Energy, Industry and Healthcare. The unit finances infrastructure, equipment and working capital and acts as an expert manager of financial risks within Siemens. End of June 2011 the total assets amounted to EUR 12.8 billion. For more information see: www.siemens.com/finance
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